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Report No. 70

Chapter 67

Mortgagee's Duty to Bring One Suit

Section 67A

67.1. Section 67A.-

While a mortgagee has no right to insist on a consolidation of more than one mortgage executed by the same mortgagor,1 he himself is under a duty to bring one suit on all such mortgages where he can obtain the same kind of decree.

Under section 67A, a mortgagee who holds two or more mortgages executed by the same mortgagor in respect of each of which he has a right to obtain the same kind of decree under section 67, and who sues to obtain such decree on any one of the mortgages, shall, in the absence of a contract to the contrary, be bound to sue on all the mortgages in respect of which the mortgage-money has become due.

1. Section 61.

67.2. Parties not the same.-

Where the parties to the mortgage are not the same, there is no occasion for the application of section 67A. This principle was illustrated in an interesting situation1 where the first mortgage was by the husband and the second mortgage was by the husband and wife with respect to another property in favour of the same mortgagee. First, there was a suit on the second mortgage and the decree was satisfied. Afterwards, the mortgagee filed a suit on the first mortgage, and an objection was raised that the second suit was not maintainable, being barred by section 67A. The objection was overruled.

1. Raja Gopalaswami Naidu v. Bank of Karalhalt, AIR 1971 SC 884.

67.3. No objection taken.-

Yet another exception to the operation of section 67A has been recognised by judicial decisions1-2 although not mentioned in the section. The section, it has been held, contains no prohibition against the institution of a suit on one of the mortgages in cases where no objection to the form of the suit was taken on the earlier occasion.

1. Pullamma Dammav Pullappa, AIR 1969 Mys 20.

2. K.C. Reddy v. R. Venkata Rao, AIR 1961 Al' 175.

67.4. Different properties.-

With reference to section 67A, it is pertinent to point out that the section does not, in express terms, deal with the case where the properties are different. As the section stands at present, however, it is wide enough to permit the construction that if the mortgagee holds different mortgages of different properties obtained from the same mortgagor, he must enforce all or none, unless there is a contract to the contrary.1

Whether, however, this was the intention of the legislature when it inserted section 67A in 1929, is not very clear. The amendment was made in order to set at rest the conflicting decisions prior to 1929, and it would appear that almost all the previous decisions related to the situation where there were successive mortgages of the same property. This is apparent from the previous case law, conveniently reviewed in the decisions mentioned in the footnotes.2-3

1. Mulla, (1973), p. 480.

2. Nilu v. Asirbad, (1920) 25 CWN 129, followed in Muhamat Babarak v. Dalip Singh, AIR 1927 Pat 117.

3. Sunder Singh v. Balu, 1898 ILR 20 All 322, followed in Dwarka Prasad v. Lilfat Rai, AIR 1931 All 549.

67.3A. Recommendation to confine section 61A to some properties.-

It is a matter for consideration whether the section should not be limited to cases where the mortgages relate to the same property. In principle, there is no reason why the mortgages should be required to bring one suit for different mortgages of different properties. There is no question of harassment to the mortgagor in such a case. In fact, in practice, the separate trial of such suits is more convenient from the practical point of view, speaking in general.

It may be noted that it has been pointed out by the Madras High Court1 that the principle of consolidation by the mortgagee becomes necessary only when the mortgage relate to the same property and that its extension to mortgages over different properties is not necessary or even justifiable. The Madras High Court suggested an amendment of section 67A to narrow down its scope.

1. M.M. Sowear v. M.M. Goundan, AIR 1956 Mad 567.

67.4. Section 67A-genesis.-

The Special Committee which reviewed the Act in 1927 observed with reference to section 67A as follows in its Report:

"While dealing with section 61, we pointed out that it is inequitable to enforce the principle of the consolidation of securities to the prejudice of a mortgagor. When, however, a mortgagee holds several mortgages in respect of the same or different properties1 it will be prejudicial to the mortgagor if the mortgagee is allowed to enforce one mortgage and keep the other mortgages alive.

In the case of a number of mortgages in which the only remedy open is foreclosure, the advantage of the mortgagor will be very marked as he may lose the whole property in satisfaction of one debt, which may be less than the real value of the property and will be liable to have a personal decree passed against him in satisfaction of the debts under the other mortgages. In the case of mortgages too where the only remedy is sale, the property will never realise its fair and proper value if it be sold subject to another mortgage."

We are not, with respect, satisfied that this reasoning can apply at all to mortgages of different properties.

1. Emphasis added.

67.5. Madras case.-

The following extracts from the judgment in the Madras case are instructive:1

"In Subrnmania v. Balasubramania, 1916 Mad 934, it was held by a Full Bench of this Court that it was open to mortgagee to bring a suit for the recovery of his debt by sale of the properties mortgaged to him subject to his interest in a prior mortgage and the principle in section 61, which was applied to a suit for sale on the mortgage by a mortgagee holding more than one mortgage on the same property, was held not to be a sufficient ground for refusing to allow a mortgagee suing on a puishe mortgagee to sell subject to a prior mortgage in his favour.

Sadasiva Aiyar J., suggested to the Legislature that section 61 of Act 4 of 1882 might be replaced by a section enacting that all consolidation, even in the case where the mortgagee and mortgagor are the same persons and the property is the same, is abolished. The view of the learned Judge was that the principle of consolidation which was abolished in the case of suits for redemption by a mortgagor who has mortgaged the same property in favour of the same mortgagee more than once be applied to a suit for sale compelling the mortgagee who had several mortgages over the same property from the same mortgagor not to institute more than one suit.

The reason for requiring the mortgagee to enforce all the mortgages which he holds in favour of the same property2 from the same mortgagor is 'that a sale of property subject to other mortgages is not likely to realise a fair price and would cause hardship to a mortgagor. In order to prevent such hardship, it was found necessary to extend the principle of section 61 to suits for sale by mortgagees who held several mortgages over the same property from the same mortgagor.

In Cadiram v. Punamchand, 1933 Nag 171, the principle of section 67A was considered to be equitable in the case of a mortgagee who held two mortgages of different dates over the same property. The reasoning is that in case of mortgage by conditional sale, the mortgagor is likely to lose the whole property in satisfaction of one debt notwithstanding that the value of the property may be more than the debt and in cases of simple mortgage, the property will never fetch its real value if it is sold subject to another mortgage.

The iniquity was found to be greater in that case where a purchaser of a part of the mortgaged property was sought to be made liable for the whole of the second debt, when he had paid the full price under the impression that it was freed from all encumbrances. But the provision was not held applicable to the facts of that case. The principle of consolidation of mortgages by the mortgagee when he 'seeks to enforce the mortgages becomes necessary when the mortgages relate to the same property by the mortgagor, and no prejudice or injustice is likely to be caused to a mortgagor if the mortgagee institutes different suits on mortgages over different properties.

The observations in 1933 Nag 171 further demonstrate the purpose for which section 67A was intended, but apparently it was extended to mortgages over different properties also in order to bring it in line with the amended section 61 without realising the necessity or the justification for a wholesale extension of the principle of section 61 to section 67A. It appears to me therefore that section 67A requires to be suitably amended by compelling only a mortgagee who holds two or more mortgages over the same property executed by the same mortgagor to sue on all the mortgages, and not a mortgagee who holds two or more mortgages over different properties from the same mortgagor."

We think that the above observations correctly state the law and there is no justification for including mortgages of different properties within section 67A.

1. M.M. Sowear v. Goundan, AIR 1956 Mad 567 (569), paras. 6-7.

2. Emphasis added.

67.6. Recommendation.-

In the light of what is stated above, we are of the opinion that section 67A should be confined to mortgages of the same properties.1

1. For the suggested revised section, see para. 67.8, infra.

67.7. Properties outside the jurisdiction-Recommendation.-

What happens when the first mortgage related to property which is outside the jurisdiction of the court before which the suit is now instituted? This question has also arisen before the courts. The view generally taken1 is that the words "all the mortgages in respect of which the mortgage money has become due" must be limited to those mortgages which the court in which the mortgagee sues has jurisdiction to enforce.

In this sense, the provisions of section 67A do not amend section 16 of the Code of Civil Procedure, 1908. Section 16 so far as material and to state only the gist thereof-provides that a suit relating to a mortgage of immovable property must be instituted in the court within whose jurisdiction the immovable property is situated.

1. AIR 1939 Rang 247.

67.8. Recommendation as to the section.-

Our recommendation to replace foreclosure is subject to Shri Sen-Varma's reservation.1 Shri Sen-Varma's view was that this amendment necessitates also the abolition of mortgage by conditional sale. It may be stated, however, that mostly foreclosure is agreed by the parties because of circumstances amounting to duress.

Whether the substitution of sale for foreclosure should also lead to another amendment, namely, addition of personal liability, was a point which came up for discussion. It was pointed out that even now, the mortgagee who has remedy of foreclosure does not necessarily have a personal remedy. Parties may agree for a personal remedy but the substitution of sale does not necessitate such an amendment. Today, the mortgagee gets the property in kind. After the proposed amendment, the mortgagee will get a right to the sale price, within the limits of the debt. We think, therefore, that no such further amendment is required.

1. Shri Sen-Varma's reservation as to section 67 (substitution of sale for foreclosure).

67.9. Recommended redraft.-

In the light of the above discussion, we recommend that section 67A should be revised as follows:-

"A mortgagee who holds two or more mortgages executed by the same mortgagor in respect of the same property in respect of each of which mortgages he has a right to obtain the same kind of decree under section 67 and who sues to obtain such decree on any one of the mortgages, shall, in the absence of a contract to the contrary, be bound to sue on all the mortgages in respect of which the mortgage money has become due".

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